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Deutsche Bank close to deal over Libor manipulation

Germany's biggest lender is reportedly nearing a plea deal with US and British authorities over allegations of interest rate manipulation. According to US media reports, the deal would include a billion-dollar penalty.

The New York Times and Bloomberg financial services reported on Thursday that Deutsche Bank was expected to pay "more than the $1.5 billion (1.4 billion euros) that UBS paid" to settle with US and British investigators over charges it manipulated the London Interbank Offered Rate (Libor).

In 2012, Swiss-based UBS accepted the highest penalty for a bank to date for its alleged involvement in manipulating the Libor interest rates.

Quoting people familiar with the matter, the two publications also said Deutsche Bank's UK-based subsidiary would plead guilty to fraud, which was a condition set by the US Justice Department for the deal to go through.

A settlement sum in excess of $1.5 billion would be the biggest penalty paid by any bank in Libor rate-rigging probes conducted by four international agencies, including the Commodity Futures Trading Commission (CFTC) in Washington and Britain's Financial Conduct Authority (FCA).

In a statement, Germany's biggest lender said: "We continue to work with the authorities that are reviewing interbank offered rates matters."

Important interest rate benchmark

The Libor rate is an average of how much commercial banks charge for borrowing money from one another. It sets a daily benchmark for trillions of dollars of transactions worldwide, including interest rates for credit card debt and mortgages.

Libor probes started about seven years ago, when it transpired that staff from major banks in Europe and the US colluded to push reference rates up or down to suit their own financial positions. In addition to Deutsche Bank, US lenders JPMorgan Chase, Citigroup and Bank of America, as well as Switzerland's UBS, Britain's Barclays Bank and Royal Bank of Scotland have come under scrutiny or have already settled claims.

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EU slaps record fine on bank cartel

EU slaps record fine on bank cartel

Deutsche Bank seeks better deal

According to the New York Times, the exact sum Deutsche Bank would have to pay was still uncertain. The newspaper's sources said the bank's general counsel met with US authorities this week pushing for a smaller penalty.

However, a number of factors were driving up the size of the fine, the paper reported - one being the bank's reluctance to produce documents advancing the investigation. Unlike UBS and Barclays, Deutsche Bank also wasn't eligible for an "early-bird discount."

In Europe, Deutsche Bank already paid more than any other bank for manipulating the Libor rate. The European Commission imposed a $900-million fine on the German lender because of its huge market share in derivative securities trading tied to interest rates.